Aide to Giuliani Warns Of Hospitals Budget Gap

By STEVEN LEE MYERS

Published: March 2, 1994

Only a month after pushing through spending cuts and layoffs at the agency that operates New York City's public hospitals, the administration of Mayor Rudolph W. Giuliani opened another assault on the agency's management yesterday, saying it may face a new budget gap of $80 million to $120 million.

Appearing before a City Council committee, the Mayor's budget director, Abraham M. Lackman, said the projected shortfall at the city's Health and Hospitals Corporation could force another round of budget cuts to balance the agency's $3.2 billion budget for the fiscal year that ends in June.

Mr. Lackman's assessment, which the corporation's president quickly rejected as premature, came amid a series of confrontations between the administration and the hospitals agency. In the last week Mr. Giuliani's chief deputy sparred with corporation board members over proposals to sell several city hospitals and over the Mayor's decision to impose a moratorium on the Kings County Hospital rebuilding project. Drafting Legislation

The administration is now quietly drafting legislation to submit to Albany that would give the Mayor's office greater control over the finances of agencies like the Health and Hospitals Corporation or the Board of Education, whose budgets operate independently of the city's.

The Mayor's senior aides, who have repeatedly criticized the spending of those agencies, declined to discuss the details of the legislation.

Whatever its final shape, such legislation could face stiff opposition, including from the City Council, which has failed in the last two years to get a measure passed in Albany to give it greater fiscal oversight of the agencies as spelled out in the City Charter.

The Council's Speaker, Peter F. Vallone, wrote to Mr. Giuliani yesterday expressing support for more oversight of the independent agencies, but he made clear that the Council should share oversight duties with the Mayor.

Mr. Lackman attributed the hospitals corporation's new shortfall to what he called overly optimistic estimates for reimbursements from Empire Blue Cross-Blue Shield and Medicaid. He said the gap, coupled with nearly $60 million in unanticipated spending at the Board of Education partly related to last year's asbestos crisis, threatened to leave the city's coffers short of cash as it finishes the fiscal year that ends in June.

The shortfalls could require more spending cuts across the city's agencies, Mr. Lackman warned, "unless revenues grow faster than we think." Overly Optimistic

Mr. Lackman's remarks, which he said were based on the hospitals agency's overly optimistic projections for revenue, appeared to catch the agency's officials by surprise. Last month, under pressure from the Mayor, the agency's board voted to close a shortfall of $166 million by laying off 1,100 administrators and support workers and cutting programs, including the burn treatment unit at Harlem Hospital and a neighborhood health clinic in Queens.

The corporation's president, Dr. Bruce Siegel, said yesterday that the steps already taken were "in full swing" and that reimbursement projections would materialize. "We believe Mr. Lackman's projections are "premature and incorrect," he said.

Mr. Lackman made his comments before the Council Finance Committee as the Council began public hearings on the Mayor's preliminary $31.2 billion budget for the 1995 fiscal year, which begins in July.

The hearings -- part deliberative process, part political showmanship -- are expected to offer a map of the political opportunities and obstacles Mr. Giuliani can expect to face as he turns his preliminary plan into a final budget by late April. Some Angry Questions

Mr. Lackman faced tough, sometimes angry questions from committee members on the administration's plans to cut the municipal work force, to reduce spending on services for children and the infirm, and to halt the Kings County Hospital project.

"How is this administration going to justify not having AIDS services, not having tuberculosis services, and putting people out of work?" Councilwoman Annette M. Robinson of Brooklyn asked.

The committee chairman, Herbert E. Berman, questioned what he termed "a lot of ifs" in the Mayor's budget plan, including concessions from the city's unions, $200 million from the Municipal Assistance Corporation and $200 million in savings from city workers' pension funds.

And Mr. Berman made clear that the Council would seek to exert power over the budget. Committee members demanded, for example, that Mr. Lackman share with them reports on the impact that the Mayor's proposed job cuts would have on services in the city's agencies. "Let nobody think this body is not an equal partner in government," Mr. Berman said.

Some Council members questioned why the administration was seeking concessions from the municipal unions but very little in productivity savings from the Police or Fire Departments. Their concerns were echoed by Raymond D. Horton, head of the Citizens Budget Commission, a private group, and Barry F. Sullivan, the former deputy mayor for finance under Mayor David N. Dinkins who is now president of the New York City Chamber of Commerce and Industry.

Some members also asked why the Mayor wanted to cut services, which would hurt the city's poorest residents, while reducing taxes, which would help the city's richest. Reimbursement Problems

Mr. Lackman opened his remarks by warning that the city budget for the next fiscal year could face deeper cuts with shortfalls in the current budget, including what he described as potential shortfalls in reimbursements for health care and for new spending at the Board of Education.

Allen J. Proctor, executive director of the State Financial Control Board, which monitors the city's finances, said Mr. Lackman's estimates appeared high. He said the hospitals corporation could face a $60 million gap if some of its steps approved last month failed to materialize.

Mr. Proctor said the city's budget included assumptions of much greater concern, including the Mayor's proposals for cutting jobs by severance, which requires approval from the Municipal Assistance Corporation that the Mayor has not yet received. If that plan collapses, he said, the city would face a budget crisis by June.

Photo: Abraham M. Lackman, back to camera, the city budget director, elicited tough questioning from Councilman Victor L. Robles after saying the Health and Hospitals Corporation could face more budget cuts. Flanking Mr. Robles were two Council members, Antonio Pagan and Una Clarke. (Don Hogan Charles/The New York Times)